The doctrine of promissory estoppel is a doctrine of equity. It makes a promise irrevocable when the acceptor acts on the promise and irreversibly changes his position.
The rationale behind this doctrine is that it is unfair if one party, acting on the promise of the other, does something to his detriment and receives no consideration because the promise is revoked.
How this principle applies on Government ?
Just like any person the government can enter into a contract just like any other individual or entity. Today, state officials make promises to individual parties who enter into commitments on the basis of these promises, only to find that the government’s discretion cannot be relied upon. The defence of statutory provisions provide sufficient umbrage for the government to go back on promises. Therefore, in this time of escalating administrative and executive facets of the State, the doctrine of promissory estoppel has gained considerable importance in the field of administrative law.
Case Laws :
It was in Motilal Padampat Sugar Mills v Uttar Pradesh 1979 that the doctrine of promissory estoppel was expounded afresh and given its most liberal interpretation by the Supreme Court. In this case, the Government of U. P. notified a sales tax exemption for three years to all new industrial units with a view to increase industrial progress. The appellant company wanted to avail of the exemption by setting up a hydrogen plant for Vanaspati manufacturing. In answer to the appellant company’s enquiry, the Director of Industries confirmed the tax concession as announced by the government. The appellant company thereupon took steps towards getting finances for the project and the necessary machinery. The Chief Secretary and advisor to the government made a further oral assurance about the exemption from sales tax as well as gave a written confirmation. Later, the government announced only partial sales tax concessions. The appellant agreed to these concessions. At an even later date, however, the government rescinded the concessional rates and the appellant company challenged it. The facts necessary for invoking the doctrine of promissory estoppel were, therefore, clearly present and the Government was bound to carry out the representation and exempt the appellant from sales tax in respect of sales of Vanaspati effected by it in Uttar Pradesh for a period of three years from the date of commencement of the production. The Government was held bound to the principle of promissory estoppel to make good the prosecution made by it. The importance of equity was emphasised as it was held that the doctrine of promissory estoppel was not really based on the principle of estoppel and instead was evolved by equity in order to prevent injustice.